A A PA A n n u a l C o n f e r e n c e O c t o b e r 2 5, 2 016 GLOBAL AND DOMESTIC OUTLOOKS The supply chains are changing sometimes radically How are industr y and governments adapting? P i e r c e H o m e r Tr a n s p o r t a t i o n D i r e c t o r M o f f a t t & N i c h o l
OVERVIEW Growth in maturing container market requires landside and oceanside efficiencies Landside effects of Hanjin may last longer than oceanside effects Big ships will concentrate and exacerbate port-related congestion Inland supply chain competitiveness an increasing industry concern Our opportunity: U.S. public and private sector creativity and cooperation
SLOWING GLOBAL DEMAND? WTO REDUCES GLOBAL TRADE GROWTH FORECAST FROM 2.8% TO 1.7% Source: WTO; Contributions to year-on-year growth in world merchandise trade by product, 2014Q1-2015Q4
A MATURING CONTAINER MARKET GLOBAL CONTAINER THROUGHPUT VS GDP GROWTH (TEU-TO-GDP MULTIPLIER) Source: Alphaliner
CARRIER ALLIANCES INTERTWINED WITH TERMINAL OPERATORS 2M TTI Ocean Alliance APMT AP Moeller Maersk 100% YTI EVERPORT PORTS AMERICA GCT SSA Evergreen 100% Dr. Chang Yung-fa (Deaceased) Family Controlled MSC 65% Global Infrastructure Partners 35% Highstar Capital 100% Deutsche Bank selling NY/NJ terminal to McQuarrie and Prince Rupert to DP World Ontario Teachers Pension 100% CK Hutchinson Holdings Limited 80% PSA 20% Public Offering $5.5 B Carrix (Parent Company) Smith & Hemmingway Family 51% FRS Capital Corp 49% TIL MAHER HPH DP WORLD Publically Traded in Dubai (2007, NASDAQ Dubai Issued 3.818 billion shares) TRAPAC EUROGATE ICTSI PSA INT L THE Alliance Hanjin Group 51% (?) TIL 49% Macquarie 49% NYK Ports 51% Brookfield 49% MOL 51% Privately Held 70% APMT (30%) Enrique K. Razon Jr. 53.4% Public 37.9% Capital Group Companies 8.7% TEMASEK Holdings (Parent Company) 100%
DECLINING EAST ASIA NORTH AMERICA CAPACITY BLUEWATER ESTIMATE: ADEQUATE OCEAN CARRIER CAPACITY AFTER HANJIN ESTIMATED WEEKLY ALLOCATED CAPACITY (TEUS) Source: Bluewater
HANJIN STRANDED ASSETS THROUGHOUT THE SUPPLY CHAIN Cargo Containers Chassis Commitments Source: Photo by Scott Varley, Daily Breeze/SCNG
BIGGER SHIPS, FEWER CALLS, MORE CONGESTION SHARE OF FLEET CAPACITY 2015 2012 78% 88% 22% 12% Coming soon - 20,000+ TEU
CONGESTION IS A GLOBAL PROBLEM THAT NEEDS LOCAL SOLUTIONS TRUCK TRAFFIC IN ROTTERDAM PORT TRAFFIC IN SOUTHERN CALIFORNIA PORT OF SHANGHAI, CHINA Unbalanced Investment bigger ships but not bigger roads Chassis Shortages physical and structural Labor Shortages regulatory and demographic Unstable Seasonal Patterns reaction to anticipated issues Customs Slowdowns government budget issues Inclement Weather climate change
U.S. INLAND IMPORT COSTS COMPETITIVE? 140 IMPORT 120 100 80 60 40 20 0 2010 2011 2012 2013 2014 2015 2016 Inland Import Cost Index (World Bank) Ocean Freight Cost Index (CTS)
U.S. INLAND EXPORT COSTS COMPETITIVE? 140 EXPORT 120 100 80 60 40 20 0 2010 2011 2012 2013 2014 2015 2016 Inland Export Cost Index (World Bank) Ocean Freight Cost Index (CTS)
COASTAL SHARE OF CONTAINER CARGO 70% 60% 50% 40% 30% 20% 10% 0% 1980 1985 1990 1995 2000 2005 2010 2015 West Coast East Coast Gulf Coast Source: AAPA
U.S. NORTH ASIA CONTAINER IMPORTS TRENDING POPULATION GROWTH AND INLAND IMPROVEMENTS SHARES OF IMPORT (TONS) PROJECTED GROWTH IN POPULATION, BY REGION Source: U.S. Census Bureau Source: U.S. DOT Freight Analysis Framework
BRAZIL: INCREASING VOLUMES AND QUAYSIDE EFFICIENCIES 2007-2012 CAGR: BRA: 6.6% CHL: 10.3% COL: 10.6% PER: 9.6% USA: 1.6% CHN: 12.7% Source: World Bank Brazil's historical and projected improvement in vessel productivity (mpvh) matches its volume growth Source: ABRATEC; Note: *=productivity (mph) refers to container moves per hour per ship
BRAZIL SEAPORT EFFICIENCIES MORE THAN OFFSET BY LANDSIDE INEFFICIENCIES AND HIGHER COSTS Cost of import and export has changed drastically for some South American countries since 2005 Landside congestion, dwell times Substantial negative impact on the bottom line of the beneficial cargo owner 3000 2500 2000 1500 1000 500 0 3000 2500 2000 1500 1000 500 0 IMPORT COST 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 BRA CHL CHN COL PER USA EXPORT COST 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 BRA CHL CHN COL PER USA Source: World Bank
2012 LOGISTICS PERFORMANCE World Bank survey of one thousand international freight forwarders 155 countries ranked Logistics Performance Index Ranking Customs RANKING BREAKDOWN (2012) Infrastructure International Shipments Logistics Quality & Competence Tracking & Tracing Brazil 45 78 46 41 41 33 49 Chile 39 35 37 44 46 41 54 Columbia 64 64 68 78 52 85 57 Peru 60 58 67 66 56 60 62 United States 9 13 4 17 10 3 8 China 26 30 26 23 28 31 30 Timelines Source: Connecting to Compete 2012 - Trade Logistics in the Global Economy (2012)
2016 LOGISTICS PERFORMANCE Brazil Chile Columbia Peru Logistics Performance Index Ranking Customs RANKING BREAKDOWN (2016) Infrastructure International Shipments Logistics Quality & Competence Tracking & Tracing 54 70 49 68 45 46 57 44 38 57 43 50 36 44 87 106 88 102 77 97 77 66 67 69 69 68 63 70 United States 9 15 5 21 7 4 10 China 26 32 24 17 26 28 32 Timelines
U.S. SUCCESSFUL SUPPLY CHAIN INNOVATIONS 66 supply chain TIGER grants totaling approximately $1 Billion Marine terminals Rail and intermodal facilities Last mile highway and bridge connectors San Pedro supply chain investments Alameda Corridor Alameda Corridor East Pier Pass Five Southeastern states have focused on major supply chain investments in dredging, highways, rail and logistic improvements Recent and committed future non-port state and federal funding for these improvements in the range of $2.8 Billion to $3.7 Billion Regional and statewide freight planning efforts likely to continue investment strategies
CALIFORNIA INNOVATION SOUTHERN CALIFORNIA INTERNATIONAL GATEWAY How good environmental legislation goes wrong Members of the International Brotherhood of Electrical Workers union show their support for BNSF Railway's proposed Southern California International Gateway (SCIG) facility during a public hearing in San Pedro in 2013. Source: Port of Los Angeles Source: LA Times
GEORGIA INNOVATION MID-AMERICAN ARC Source: Georgia Port Authority
FLORIDA INNOVATION FDOT INLAND LOGISTIC CENTERS (ILC) Generally, the ILC Infrastructure Support Program is used to support on-site investments at a designated ILC For those ILCs that meet certain criteria, statewide FDOT funds can be used to support improvements to designated intermodal connectors or to the state s major highway and rail corridors Source: Florida Department of Transportation (FDOT)
AMAZON SUPPLY CHAIN INNOVATION Source: MWPVL International
WHERE ARE TRANSPORTATION & LOGISTICS JOBS CONCENTRATED IN U.S.? CITIES WITH 20,000 OR MORE JOBS IN THE TRANSPORTATION & LOGISTICS SECTOR
U.S. ECONOMIC GROWTH KEEPING PACE GLOBALLY SHARES OF NOMINAL GLOBAL GDP Source: World Trade Organization (WTO)
U.S. FEDERAL INFRASTRUCTURE FUNDING MUST BECOME RELIABLE Source: U.S. Department of Transportation (USDOT)
U.S. POLICIES NEEDED TO REWARD & INCENT PRIVATE INVESTMENT Low investment and therefore low growth in developed economies PRIVATE INVESTMENT & PROFITS IN DEVELOPED ECONOMIES Source: UNCTAD
CONCLUSIONS Growth in maturing container market requires landside and oceanside efficiencies Landside effects of Hanjin may last longer than oceanside effects Big ships will concentrate and exacerbate port-related congestion Inland supply chain competitiveness an increasing industry concern Our opportunity: U.S. public and private sector creativity and cooperation
THANK YOU Questions? P i e r c e H o m e r Tr a n s p o r t a t i o n D i r e c t o r M o f f a t t & N i c h o l p h o m e r @ m o f f a t t n i c h o l. c o m 8 0 4-8 4 0-1 5 3 8